Stamp duty is a fee you will most likely incur at some point in your lifetime. It may be on a home, a car, or your insurance. For this reason, it may be worth understanding the intricacies of stamp duty.
Why do we need to pay for it? How do you calculate it? And can you avoid it? These are all popular questions surrounding the topic. Beyond this, there can be a handful of additional fees you may need to look out for. So, let’s discuss the ins and outs of stamp duty and how it may affect you.
Please note, specific ideas and products presented in this article may not be on offer by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.
What is stamp duty?
Stamp duty, or transfer duty, is a transaction tax imposed by the government on individual purchases. The price of stamp duty will change depending on a few factors. These being the value of the transaction, the type of transaction, and your location.
You will most likely find stamp duty on transactions involving property, vehicles, and insurance. It is labelled ‘stamp duty’ because, in days gone by, you required a physical stamp on the documentation before the transaction was final.
The stamp doesn’t have to be physical these days. However, if you do not pay it, the contract cannot legally come into effect.
Why do you need to pay stamp duty?
Stamp duty is the responsibility of state governments, not the federal government. You are required to pay for the legal documents to complete the transaction.
Typically, the main document is the ownership title. The purpose of this is to run a search and ensure you are buying the home, vehicle or insurance from the right person. While slightly inconvenient, you would hate to realise someone has fraudulently sold you something that they didn’t have the rights to sell.
So, think of stamp duty as solidifying that the transaction is fair and that the item for sale will become legally yours.
How is stamp duty calculated?
Typically, stamp duty is calculated based on the purchase price. The more expensive the item you are purchasing, the more pricey your duty will be. The property value used in the calculation is the higher figure of either purchase price or bank valuation.
If you are purchasing a property off the plan, the bank estimates the value based on the land and building’s cost at the contract sale date. The contract sale date is the date when you pay the home loan deposit and sign the contract.
The other factor is where you live. It is essential to verify your state’s stamp duty policies as prices and waivers are state-specific.
Do sellers need to pay stamp duty?
No, the buyer will always have to pay the stamp duty regardless of what you are selling. You will only have to pay the duty when you purchase your new home.
If you are selling a home with no intention of buying another, stamp duty won’t apply to you at all. As the buyer is looking for the name change, a mandate says they must pay the required fees.
How much is stamp duty?
Often, instead of doing the calculations yourself, it may be far easier to use a calculator for this purpose. Stamp duty calculators are free online and may even be accessible on your state government’s website.
Keep in mind that these will only be an estimation and may round to the nearest hundred. Stamp duty on property is the most common form and, as such, varies by the following:
- Whether it is vacant land for building your first home
- An established first home
- A home that is not your first
- An investment property
- Vacant land
When you use a stamp duty calculator, you will have to select which of the above property types applies to you. Then you will have to enter the purchase price. Calculating this will give you a better understanding of how much extra you will need to have saved.
Stamp duty discrepancies by state
Stamp duty itself is a nationwide fee. However, the conditions vary by state. So, if you move from one state to another, it may be worth informing yourself on the stamp duty laws for that location. Below are the keys aspects of duty by state:
Stamp duty QLD
In Queensland, if your property’s value is less than $5,000, no stamp duty applies. However, if your property has a value between $5,000 and $75,000, a rate of 1.5% will apply. If your property is worth more than $75,000, your stamp duty will be $1,050 plus $3.50 for every $100 over. If you are a first home buyer and your home is worth less than $550,000, the government will waive stamp duty.
Stamp duty NSW
In New South Wales, the rate varies. However, if your property’s value is between $300,000 and a million dollars, your stamp duty will be $8,990 plus $4.50 for every hundred dollars over the $300,000 threshold. First home buyer grants are available.
Stamp duty VIC
In Victoria, if your property is worth less than $25,000, your rate will start at 1.4%. If your property is worth more than $960,000, your rate goes up to 5.5%. First home buyers can have stamp duty waived if their property is worth less than $600,000. If a pensioner’s home is worth less than $330,000, they will also be exempt.
Stamp duty TAS
In Tasmania, the duty rate is $5,935 plus an additional four dollars for every $100 over $200,000. Tasmania does not offer any privileges to first home buyers or pensioners.
Stamp duty WA
In Western Australia, if your property’s value is under $120,000, your stamp duty rate will sit at 1.9%. If your property is worth more than $725,000, your rate will rise to 5.15%. There are no exemptions for first home buyers.
Stamp duty SA
In South Australia, properties exceeding $500,000 are charged $21,330 plus 5.5% of the value above $500,000.
Stamp duty NT
In the Northern Territory, there is a complex formula for calculating your stamp duty. However, this formula does not apply if your property is worth more than $525,000. These properties have a flat rate of 4.95%. New homeowners may be eligible for $7,000 of their stamp duty. Pensioners may also be eligible for certain concessions.
Stamp duty ACT
In the Australian Capital Territory, if your property is valued at less than $200,000, your stamp duty will be whichever is greater out of $20 or $1.48 per each $100. As the value increases, so will the stamp duty rate. Concessions are available to first home buyers and pensioners.
Car stamp duty
Regardless of whether you chose to buy your next vehicle as new or used, stamp duty will apply. You may also see this referred to as vehicle registration duty. As with property, car stamp duty is a one-off fee for the transfer of ownership. Vehicle stamp duty is also similar to property duty in the sense that it varies by state.
While it might be wise to read up on how your state calculates stamp duty. Your state government may offer a car stamp duty calculator. To calculate your duty, you will have to enter information on the vehicle’s value, the vehicle type (light, heavy, special) and the motor type (hybrid, electric, number of cylinders). This should quickly generate your stamp duty. This is useful for gaining an understanding of what to expect before making your purchase.
Exemptions to vehicle registration duty
In some circumstances, there can be exemptions to stamp duty when transferring ownership of a motor vehicle. While these vary based on the state you live in, some of the accepted reasons for exemption may include:
- The vehicle is registered under a business name, a business restructure occurs or the car is for primary production or charity use.
- The vehicle is a gift or part of a matrimonial matter.
- You have lost the use of a limb, are an ex-service person, or have received the vehicle from a deceased estate.
There may not be exemptions for seniors or pensioners. However, you may be able to apply for a reduction in your vehicle registration duty.
Stamp duty on insurance
Another service that stamp duty may apply to is certain forms of insurance. Again, insurance duty varies by state. It is charged based on your insurance premium and GST (which is usually a combined cost). Rates may be subject to change depending on the type of insurance your premium covers.
Some insurance types that carry stamp duty include CTP insurance, accident insurance, and life insurance. Types of insurance that may receive an exemption from duty include health insurance, marine insurance, charitable institution, goods in transit insurance, and reinsurance. For more information on how this works and what you may be exempt from, you may need to contact your relevant state government department.
Stamp duty and first home buyers
As previously mentioned, some first home buyers may be entitled to waived or discounted stamp duty in certain states. This is typically dependent on the value of the property. Beyond this, first homeowners may also be entitled to various grants. These grants may vary depending on location. For example, urban home buyers may receive a smaller discount than rural home buyers.
If you are a first home buyer intending to build, there are specific government programs designed to assist you. For example, you may need to investigate the HomeBuiler grant and its availability in your state.
Stamp duty on land
Stamp duty can apply to any property purchase, regardless of whether the land comes with a house on it or not. Typically, the more expensive the purchase, the more expensive the duty. This means it can potentially be cheaper to purchase an empty plot with intentions to build. However, location does influence how expensive your land may be.
If you are unsure what a plot of land will cost you in duty expenses, you can use a stamp duty calculator to gain some clarity. Specific calculators may even have the option for you to select vacant land as your property type.
Stamp duty for businesses
When you purchase a business, you might become liable for stamp duty on certain business assets. Depending on the state you operate in, business assets could include:
- The business name, franchise agreement, and business license.
- The business’s supply right, intellectual property and personal property (such as any equipment).
- You may also have to pay duty on that business’s debt if applicable.
Failing to pay stamp duty on the transfer of a business’s assets may result in specific penalties.
Are there any exemptions?
Depending on your home state’s regulations, several valid reasons may exempt you from or reduce your stamp duty. It is essential to check with your state government first. If you are a first home buyer, an owner-occupier, disabled, a pensioner, buying off the plan, or a farmer, you could be eligible.
Each of these possibilities varies in criterion and reduction sizes. However, they can help a person or family to relocate more affordably. Certain states may also waive duty on property transfers between spouses and between family farms used solely for primary production.
Stamp duty on a second property
There’s no escaping stamp duty. It will apply to every property you purchase, including purchasing a new home, an investment property, a holiday home, or vacant land. Stamp duty calculates the same regardless of how many properties you buy.
However, stamp duty laws apply by state. This means if you purchase a second property in a different state to the state you currently reside in, you will have to pay the stamp duty according to that state’s regulations.
Can you claim stamp duty?
Regardless of whether you are an owner-occupier or an investor, you cannot claim duty as a tax deduction. If you are an owner-occupier, you may be access certain stamp duty reductions based on your situation. As an investor, the ATO will not allow you to claim your duty on tax as it qualifies as an ‘acquisition cost’ and is a part of your cost base.
There are, however, some property purchase expenses you may be able to claim to lighten the load of moving home. These may include costs related to valuation, document preparation and establishment fees for your loan. You may also claim for lenders mortgage insurance and stamp duty charged on your mortgage if applicable to your state.
Beyond this, you may also claim ongoing deductions on investment property and deductions for any improvements you make to your investment property. If you are unsure what you are entitled to, consider speaking with a financial advisor or a tax accountant.
Can you add stamp duty to your mortgage?
You can’t currently add stamp duty to the total cost of your mortgage. However, there are other ways to help yourself accommodate the cost of your duty. The most common way is by increasing your loan amount so that your stamp duty figure will come out of your cash deposit.
You would need a minimum deposit of 10% to add lenders mortgage insurance and stamp duty onto your loan’s principal. As payment is required to be upfront, it is worth saving a larger deposit for all the little additional costs of purchasing a home. Some other expenses worth saving for include building inspection fees, valuation fees, conveyancing and establishment and settlement fees. Buying a home is never as simple as it appears at first glance.
Check out Moneysmart’s guide to buying a home to learn more.
Will you need to pay stamp duty if you have a guarantor?
A guarantor is a third party, usually a parent or close relative, that is willing to secure the loan you are applying for against their home’s equity. This allows you to apply for much larger loans than you may have had access to otherwise. There is a mix of positives and negatives to this strategy. Often, it is considered to be risky.
If you have a relative willing to cover your loan as a guarantor, you will be entitled to significantly more than you may have been on your own. Potentially, with a guarantor, you may be able to borrow up to 110% of your loan. This means that you can use the loan to cover your stamp duty along with other additional purchase costs.
However, should you fail to make your repayments and end up defaulting on your loan, you could leave your family members in hot water. This is because if you can’t repay, the responsibility for the loan falls to your guarantor. If they can’t cover your repayments in cash, the bank could potentially repossess their house to cover what you owe on your loan.
If you plan on taking a guarantor loan, you need to have an honest conversation with your guarantor-to-be and even consider drawing up contracts that protect each party if you fail to make your repayments.
GST and stamp duty?
Typically, these fees are separate from each other. As most of the properties on the market are free from GST, it is unlikely that you will encounter both of these in your costs. GST may apply to any properties being sold as new property or vacant land as it is not technically a residential premise. GST, in Australia, is combined into the total price of the goods or services. Stamp duty is calculated on the total value of the residence. Therefore, these two concepts won’t hinder your buying process. They are merely two components of the fees you will pay.
For the rest of the properties on the market, regardless of whether they are owner-occupied or investment properties, GST will not apply.
Stamp duty for foreign buyers
If you are a foreign citizen looking to buy property in Australia, stamp duty will apply. However, in all states except the Northern Territory, it will be higher than it is for an Australian citizen. The terms surrounding what stamp duty you will be required to pay, vary by state. They are also subject to change. So, if you are considering purchasing Australian property, you will have to ensure you locate the information specific to you. Certain exceptions to this include New Zealand citizens and 444 visa holders. There are some ways to minimise or avoid stamp duty if you are a foreign citizen.
One way, in particular, is having a partner who is an Australian citizen. Another is to buy the land first and pay a decreased duty and then build a house. Or you could move to the Northern Territory and pay the same stamp duty as an Australian citizen. Please note that if you are considering buying Australian property, you should consider speaking with a professional first as this is a complex process subject to changes.
If you want to make the process of buying a property much easier for yourself, you may consider hiring a conveyancer. You can locate a conveyancer through a law firm’s conveyancing company, and their work may be solicitor supervised.
Once you sign the contract for a property and put down your deposit, your conveyancer will step in. They may help with insurance and run through the guarantees the seller put in the contract to ensure you are getting what you expected. Your conveyancer may then check to ensure that your lender’s conditions will be satisfied when you receive the money.
From there, they will then work on paying the stamp duty on the contract within 30 days of the contract becoming unconditional. Your conveyancer will then ensure all the details on your transfer are correct and match the contract you sign.
While this is only a rough idea of how conveyancing works, if you are unsure how to execute the moving process’ legalities, conveyancing might offer a reliable helping hand to get you through.
Other additional fees accompanying home loans
Taking out a home loan will most likely be one of the most significant expenses of your lifetime. You won’t only have the mortgage loan itself to cover, but also a plethora of other additional costs that may sneak up on you. Some of the most prominent of these fees include:
Property valuation fees
This is the charge your lender adds to go out and value your property. You cannot take out a home loan without a property valuation, meaning there is almost no way around this fee.
Lenders mortgage insurance
This is the extra charge that protects your lender if your deposit is less than 20% of your loan. To avoid paying this, you can consider saving up a larger deposit, applying with the First Home Loan Deposit Scheme or adding a guarantor to your loan.
Late payment fees
This is a fee you will get hit with if you do not pay your complete monthly repayment by the due date. To get around this, if you cannot make a repayment, you can ask your bank for a financial hardship form or a repayment freeze.
Having someone organise all your conveyancing for you is excellent. However, you must pay your conveyancer for their work. To avoid this, you can elect to sort out your paperwork and stamp duty independently.
These are just a few of the more apparent fees. For example, you can also expect to come across application fees, legal fees, mortgage registration fees, annual, redraw, and switching costs. Should you intend to refinance your home loan, you may even encounter home loan exit and discharge fees.
This can, understandably, feel quite overwhelming. If you aren’t sure where to start or need help with the process, feel free to speak with your bank, lender, or financial advisor. Alternatively, there may be a host of free, online government resources designed to assist you. For instance, the Moneysmart website may provide plenty of useful advice.
Monzi: the Aussie lender-finder for you
Here at Monzi, we don’t offer home loans. Moreover, you can’t buy land or vehicles from us. As a result, you won’t encounter any stamp duty in our process. However, we are a lender-finder service. So, if you need to apply for personal loans of $300 to $10,000, we might be able to match you with a great lender in just 60 minutes.
All you have to do to start the process is click the ‘Apply Now’ button or scroll to the top of our screen. We’re always ready to hear from you. With easy applications and fast outcomes, our service might be the hassle-free option you’re after when you need a fast cash loan today.
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